Discussion:1031 Exchange: held for investment?
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> 1031 Exchange: held for investment?
Discussion Forum Index --> Tax Questions --> 1031 Exchange: held for investment?
Bobbennett7 (talk|edits) said: | 13 July 2008 |
| A client has asked me a 1031 question. He and his family lived in a co-op apt. for 29 years. They then moved out and left the apt. vacant for the next 10 years, which ended June 30, 2008. The maintenance was low and he expected appreciation. He now wants to sell the apt. in a 1031 exchange for a condo to use as rental property.
Would the relinquished property be considered "held for investment," given that it was put to personal use for 29 years? Any other perceived problems with 1031 exchange? Many thanks in advance for help with this. | |
| 13 July 2008 | |
| wow, a co-op apartment in New York City vacant for over 10 years!!!!! Someone's been asleep! | |
Death&Taxes (talk|edits) said: | 14 July 2008 |
| While it covers vacation homes, you might look at Rev Proc 2008-16 | |
| 14 July 2008 | |
| I still find it hard to believe that someone with an investment intent would let the property go vacant for 10 years, rather than trying to lease out, unless it was uninhabitable for some reason. Maybe it was the unit next to the Taco Bell or whatever restaurant in NYC that had all the rats? | |
Death&Taxes (talk|edits) said: | 14 July 2008 |
| Or personal use? I know I had a client who sold rather than hold because the Board of the building would put them through so many hoops to rent out the premises. | |
| July 15, 2008 | |
| The Taco Bell was on 6th Ave in Greenwich Village. Maybe the bad publicity cut the rental from $5/sq ft/month to $4, but that didn't make leaving it vacant very smart. | |
| 15 July 2008 | |
| I'm not aware of any default rule, but it seems to me you must actively do something to make an asset a personal use asset, don't you? If he didn't occupy the place for the last 10 years, how could it be a personal use asset? Seems clear to me that he converted it 10 years ago to investment property, which he continued to hold while hoping for price appreciation. Does he have to maximize his investment return by renting it out? No. | |
| 15 July 2008 | |
| Oly, I was merely pointing out the seeming discrepency - as DT pointed out, there could have been good reasons why it was not rented, especially the Board rules. If I were doing this tax return I'd want to make sure that the client's story passed the 'smell test'. I am only encouraging Bob to make sure he can support his client's statement. | |
Bobbennett7 (talk|edits) said: | 17 July 2008 |
| Many thanks to all for the info.
--Bob | |
| 21 July 2008 | |
| Bob - check out Rev. Proc 08-16
new safe harbor rules which could be applied to "occaisional" personal use property including vacation homes | |
| July 21, 2008 | |
| Kevin, thanks for posting the reference. I read an article about it this weekend and was going to pull up the RevProc. It's nice to have some guidance/specifics. | |
| 21 July 2008 | |
| it just goes to show that our answers are always subject to revision as things change.
When I'm out teaching tax updates, about every other year there are new rules and definitions (a la Uniform Definition of a Child) affecting EITC. I always say that the IRS doesn't change the questions, they just change the answers. | |
Death&Taxes (talk|edits) said: | 21 July 2008 |
Funny thing, I gave the same source in the second answer above, but provided no link.....maybe I wrote in invisible ink  I am not chiding you, Kevin, but it strikes me how often I, and most of us, only read the last two or three postings in a string.
| |
| 21 July 2008 | |
| Well now, I usually DO read whatever you wrote, DT. I'm sorry. | |
| July 21, 2008 | |
| DT, you didn't use 'blue' ink when you referenced the link <W> | |
Death&Taxes (talk|edits) said: | 21 July 2008 |
| Right you are, shoulda coulda done that.....but it strikes me so often that when you read thru long discussions, so many people, self included numerous times, only read the most recent posts. So many times you run into these disconnects....you want to say, 'what the heck is he thinking.' | |
| July 21, 2008 | |
| Especially those that are actually a few month, or a year or more, old. I'm learning to check the OP date before just going to the end and reading up. | |
